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Korein Tillery, LLC v. Advanced Analytical Consulting Group, Inc.

United States District Court, S.D. Illinois

September 12, 2017

KOREIN TILLERY, LLC, Plaintiff,
v.
ADVANCED ANALYTICAL CONSULTING GROUP, INC., DANIEL S. LEVY and AUDRIUS GIRNIUS, Defendants.

          MEMORANDUM AND ORDER

          J. PHIL GILBERT DISTRICT JUDGE.

         This matter comes before the Court on the Court's May 10, 2017, order to show cause (Doc. 10) and plaintiff Korein Tillery, LLC's motion to remand (Doc. 15). Korein Tillery combined its response to the order to show cause with its motion to remand, and defendants Advanced Analytical Consulting Group, Inc. (“AACG”), Daniel S. Levy and Audrius Girnius have filed a combined reply/response (Doc. 24).

         I. Background

         In this case, Korein Tillery, a law firm, alleged that it engaged AACG in August 2015 to provide expert litigation services regarding damages calculations, specifically, a study that would yield a calculation of damages for an entire case in which Korein Tillery represented the plaintiffs. Levy and Girnius were economists who worked for AACG and communicated with Korein Tillery prior to its commissioning the study. After AACG began the study, the cost estimate nearly doubled. In addition, Korein Tillery alleges that after it paid AACG a substantial sum, it learned that AACG had failed to perform as promised and was unable to provide the damage calculations requested. Korein Tillery ultimately terminated the arrangement with AACG in February 2016.

         Korein Tillery originally filed this case in March 2017 in the Circuit Court for the Twentieth Judicial Circuit, St. Clair County, Illinois. It sues the three defendants for fraudulent misrepresentation both before and after their written agreement was signed (Count I), rescission of the agreement because of a mistake of fact (Count II), breach of contract (Count III), negligence (Count IV), gross negligence (Count V), violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”), 815 ILCS 505/1 et seq. (Count VI), and unjust enrichment (Count VII). Korein Tillery specifically alleges that Girnius participated in conversations with Korein Tillery predating the execution of its agreement with AACG, and that Girnius “reiterated the promises regarding the work that could be performed based on the proposed study.” Compl. ¶ 4 (Doc. 1-1 at 1). It makes further allegations against “the defendants” without specifying Girnius. Compl. passim (Doc. 1-1)

         On May 4, 2017, the defendants removed the case to federal court. In their notice of removal, the defendants claim removal was proper based on original diversity jurisdiction. See 28 U.S.C. §§ 1332(a) & 1441. The defendants realize that Girnius may share Illinois citizenship with Korein Tillery, which is a citizen of Illinois, Florida and/or Missouri, so there may not be complete diversity. However, they assert that Girnius was fraudulently joined in this lawsuit, so the Court should disregard his citizenship for jurisdictional purposes. They note that Korein Tillery makes only a single factual allegation specifically against Girnius. Noting the apparent lack of complete diversity, the Court ordered Korein Tillery to show cause why the Court should not find it has fraudulently joined Girnius and disregard his citizenship for the purposes of determining whether diversity jurisdiction exists.

         Korein Tillery responded to the order and moved to remand the case (Doc. 15). It argues that there is a reasonable possibility Girnius is liable under the ICFA and under theories of fraud and negligence/gross negligence because he misrepresented that the study undertaken was possible to perform and/or, the flip-side, he concealed that the study undertaken was impossible to perform. It also believes he could be held liable for negligently performing his duty as an expert economist. Korein Tillery further argues that the common defense rule precludes a finding of fraudulent joinder. It has attached to its response a proposed amended complaint expanding the allegations against Girnius.

         The defendants assert that Korein Tillery's sole motive for suing Girnius is clear and improper: to destroy diversity to prevent the exercise of diversity jurisdiction. Girnius is the only Illinois citizen of the eighty-five individuals who worked on the study and performed less than 5% of the work, yet Korein Tillery sued him and no other non-management individual working on the project, suggesting its motive was not to hold the wrongdoers responsible but to spoil complete diversity. The defendants also argue Korein Tillery cannot succeed on its fraud or ICFA claims because Girnius's alleged fraudulent conduct is not pled with sufficient particularity and does not relate to a present state of facts as opposed to future events. As for the negligence claim, the defendants argue Girnius owed no independent duty to Korein Tillery separate from AACG's duty. Finally, the defendants argue that the common defense rule does not apply because each defendant performed different conduct relating to this dispute.

         II. Analysis

         A. Fraudulent Joinder

         The doctrine of fraudulent joinder is based on the principle that a plaintiff cannot defeat a defendant's right to removal by naming or joining a non-diverse party against whom it has no chance of success. Morris v. Nuzzo, 718 F.3d 660, 666 (7th Cir. 2013); Schur v. L.A. Weight Loss Ctrs., Inc., 577 F.3d 752, 763 (7th Cir. 2009); Gottlieb v. Westin Hotel Co., 990 F.2d 323, 327 (7th Cir. 1993). The Court must ignore the citizenship of a fraudulently joined defendant when determining if it has original diversity jurisdiction. Morris, 718 F.3d at 666; Schur, 577 F.3d at 763; Gottlieb, 990 F.2d at 327. If diversity jurisdiction exists once the fraudulently joined party's citizenship has been disregarded, the Court may dismiss the fraudulently joined defendant and continue to exercise jurisdiction over the case. Morris, 718 F.3d at 666; Schur, 577 F.3d at 763. The party invoking the Court's jurisdiction bears a heavy burden of persuasion to demonstrate fraudulent joinder. Schur, 577 F.3d at 763. Doubts about whether a defendant was fraudulently joined and whether removal was proper must be resolved in favor of the plaintiff. Morris, 718 F.3d at 668. Fraudulent joinder must be proved by clear and convincing evidence. 5 James W. Moore et al., Moore's Federal Practice § 102.21[5][a] (3d ed. 2002).

         Fraudulent joinder can occur in two circumstances: (1) when there is no possibility that a plaintiff can state a cause of action against a non-diverse defendant or (2) where there has been outright fraud in plaintiff's pleading of jurisdictional facts. Gottlieb, 990 F.2d at 327. To establish fraudulent joinder under the first prong, the path at issue in this case, a defendant must demonstrate that, “after resolving all issues of fact and law in favor of the plaintiff, the plaintiff cannot establish a cause of action against the in-state defendant.” Poulos v. Naas Foods, Inc., 959 F.2d 69, 73 (7th Cir. 1992) (emphasis in original); accord Morris, 718 F.3d at 666; Schur, 577 F.3d at 764. This burden is more favorable to the plaintiff than the burden for dismissal under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. See Schur, 577 F.3d at 764 (citing district court cases making this observation). If there is “any reasonable possibility, ” Poulos, 959 F.2d at 73, that the plaintiff could succeed against a defendant, the defendant will not be deemed fraudulently joined. Schur, 577 F.3d at 764.

         There is an exception to the general rule of fraudulent joinder where the defense used to show that no claim can succeed against a non-diverse defendant is shared by all defendants. See Walton v. Bayer Corp., 643 F.3d 994, 1001 (7th Cir. 2011). This exception, called the “common defense rule, ” prohibits a finding of fraudulent joinder where to do so would require a determination on the merits of a colorable defense shared with the diverse defendants. Tile Unlimited, Inc. v. Blanke Corp., 788 F.Supp.2d 734, 740-41 (N.D. Ill. 2011) (citing Boyer v. Snap-On Tools Corp.,913 F.2d 108, 113 (3d Cir. 1990); Smallwood v. Illinois Cent. R.R. Co.,385 F.3d 568, 575 (5th Cir. 2004) (en banc)). The rule applies only where the showing that ...


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